The Wrong Time and Wrong Market (or Failing in the Entertainment Industry)

This is a quick story about how I started my first company (a record label) after college, lived my dream, drained my life savings (and more) and eventually moved this into my memory bank as one of the funnest times I’ve ever had.

The Story …

Back in the early 2000’s I started a record label in Phoenix, AZ. Its name: Grave 9 Records. It was started late one night at the office I worked in with a friend of mine and a couple of friends that were in a band. When it first started I was the financing and talent management/distribution/etc and he was the other half of the acquisition (long story short – he had the easy job). Over the next 7 years I’d grow this label from a single band (I was not in any of the bands) to 5 bands and a hip hop artist. We released over 8 different titles, toured the country, got on Warped Tour, SXSW, Ozzfest and distribution through Revelation Records. At one point one of our artists was featured on a compilation CD by the Warped Tour that ended up in every Hot Topic store around the world (still, not “Making it” but still, it was cool).  We recorded at the same studios as Linkin Park, No Doubt, Jay Z among other industry greats. We had the same producer/engineer as those groups too etc (note: relationships are everything). We had designers who designed our artwork who are currently responsible for industry hits such as Assasins Creed and comic books such as 68′ and such. We even had one of our bands finally get offered a “deal” by a major label (which would have worked out well for us too – of course) … but they decided that they had proved what they wanted to prove to themselves and they left the music scene (kind of sad, but I completely understand). We had everything in our hand. My co-founder worked at the largest alternative station in Phoenix, Arizona at the time as a DJ. We had the look, feel and appearance of a big indy label, yet… we were struggling to eat ramen (which to be honest – couldnt afford either).

At the time I worked full time for Todd McFarlane to finance this effort. I had no kids, had 3 roommates, no dogs and a simple life. I spent everything (and more) on this label. In the last three years of the label I had bought a tour van for the label so bands could tour easier (tour van costs were quite high, so I took on that cost). While working I continually took weeks off at a time to follow this dream of working in the music industry. This isn’t the first foray into the music industry I had (I did a lot of work for AFI, Offspring, Authority Zero and various other artists and labels: Atlantic Records, Dreamworks, etc)… but … it was finally my opportunity to see if we could make it as a team. The team being me, my co-founder and our bands.

Long story short, it didn’t work. I spent over 140K of my own money during the course of 7 years to finance this label. I’m still paying for the cost of this venture to this day. However, if I had to do it all over, I’d do it in a second. It was one of the best experiences of my life. It was one hell of a ride…

One event always sticks out … I’m not sure if it was 2004 or 2005, but we snuck into Warped Tour as a “Vendor”. Sneaking into warped tour with a 12x12x15 foot bright orange tent and 30,000 stickers, 15 boxes of merch and ice chests isn’t exactly an easy process. But we did it. We even had the tour director stop by with his clipboard and say “I don’t see you guys on the roster, who are you?” We told him who we were and that we were only on for a few dates. He shook our hands, got our names and said “Wow, well, you have one of the best looking tents on this tour guys – good work. We must have missed something. Nice to have you on the tour. See you around.” Needless to say, we were sweating bullets. I was 23 maybe 24 years old, the founder, facing some type of fine and probably police problems if he found out we snuck in illegally. Thank goodness he didn’t.

Lessons Learned

This was truly my first foray into being an entreprenuer. Seven years after starting it, I folded up shop, 140K lighter in the pocket with a tour van still in my possession that I had to figure out how to get rid of (with all the miles from going across the country TONS of times I was WAY in over my head in regards to financing and what the blue book on it was). The company failed for many reasons, but I do believe that one reason we failed is because we did not embrace the change of technology when I wanted to (RE: iPod and digital distribution). The iPod changed the game of music, forever. Not recognizing this early enough (or at all for that matter) is a major factor in why we did not survive. When paradigms shift, don’t fight them, recognize them.

Of the things I’ve learned from this foray these are the most important (and they’re not groundbreaking either and in no specific order):

• Get a Accountant and Accounting System
  • Do you have a business now? Do you have an accountant? No? Stop reading this, pick up the phone and find one. NOW.
  • Not knowing your P/L or aging reports or where your expenses are will kill you. This will keep you up at night.
  • Don’t have an accounting system? Use Quickbooks online, or Freshbooks or Indinero, or something …anything.
• Pay your taxes, on time.
  • Government fees are murderous. Again, see step 1. GET AN ACCOUNTANT.
• A/B Test everything.
  • If you’re going into a new venture (acquiring a new band) test them out. Get them on a CD or complication you’re doing first before you take them on. See how they act, see if you “gel” see if this looks like its going to work. Everyone wears a different face for the first few weeks or month until they get used to their environment. Thats when the real demons come out.
  • The goes the same for employees. Perhaps you might want to contract first and then if you like them (or give them a 30 day probation period where you evaluate their performance before you take them on full time).
  • The same goes for a website. Test purchase funnels. Test navigation routes. Test button colors. Do everything.
• Examine you contracts with an eagle eye
  • Don’t let someone get one hell of a deal without you getting a deal too. Read your contracts. Have other people read them (lawyers).
  • Be a stickler if you don’t like something. You may not get them to completely change something, but you may get them to agree on an alteration to the said issue that is favorable for you.
• Get a lawyer
  • The rider to get a lawyer is what kills a lot of people. But find someway to get a lawyer and pay him, it will make your life easier and you’ll have less stress.
• Cut the non performers early (fire people that don’t perform fast)
  • If you hire them, you can fire them. As James Altucher says in his book How to be the Luckiest Person Alive, people that work for you and talk behind your back, disrespect you, etc are a cancer. Get rid of them.
  • If they don’t perform as you thought they would, cut them.
  • As a label owner I should have had more details in the contract about this  – basically … I should have had the right to let the band go at any time at my discretion. That holds them accountable for what they’re doing. Now the same can be said about them and me, but this wasn’t the case. I was crazy busy with this company, so it’s not like I wasn’t working.
• Don’t be afraid to try something new, even if everyone thinks your absolutely crazy.
  • I wanted to go completely digital in 2003 when I felt the iPod was really revolutionizing the world. My bands were too worried about having physical CD’s to sell and not being able to find it at the local record stores. For the most part, physical CD’s are dead now. Record stores are throwbacks and are only useful to me when I need to “dig” for records to sample or to play with. I think we’ll see a downsize in record stores in the next 3-4 years. Long story short- if you have an idea, pursue it.

Last … but certainly not least …

• Stop lying to yourself
  • Look at your business. Is this going to work? Just as yourself the simple SWOT analysis questions. If you’re alright with everything you come up with, then good, keep at it, othewise its time to rethink your plan.
  • Stop telling yourself “oh, it will get better once I do X.” Most likely, it wont get better.  There is no golden egg (and for those who do have golden eggs – you’re outliers). Recognize these issues quick.
• Realize your end goal and realize when you’re in too deep
  • Having an accountant and being in CONSTANT contact with them helps you realize where your money is at.
    • Have a budget for your company
    • Stick to that budget
  • Be able to recognize you’re not going in the direction you want.
  • After you wake up for 3-4 weeks and thinking “damn it, this is not what I want to do anymore” … its time to quit. Move on.

Again, this is not any sort of revelation, its just a story of what I’ve done and what I’ve learned. That said, I really do wish a few books were written before I had started these endeavors:

• Getting Real
• ReWork
• Four Steps to an Epiphany
• Four Hour Workweek

… the probably would have helped me either a) become profitable, b) quit before I lost THAT much money or c) realize what I was doing was a lost cause.

Regardless, I’d do it all over again. Hindsight is 20-20, I just wish I had taken off those rose colored glasses or had a entrprenuer group to talk to about my challenges. Thankfully, those things now exist in Arizona and I hopefuly wont make those same mistakes again.

Live and learn.